The Impact of the Implementation of IFRS on the UK Companies - Dissertation Example

The implementation of IFRS involves deviations from the established accounting practices adopted in a country with respect to financial reporting. Though the issue of financial reporting has several dimensions, tackling information asymmetry, impacts with reference to the stakeholders’ interest and equity principles involved in the process are very important for the sustainability of the concept in the long run. Bell & Braun (2011) state “The new standard (financial reporting standard for medium-sized entities (FRSME) based on IFRS) is considerably shorter and less complicated than current UK GAAP.

It also provides for disclosure exemptions for qualifying group subsidiaries which would cut the reporting burden and allow them to make significant cost savings”.Benefits of harmonization or Reasons underlying the adoption of IFRS in the UK and Europe Restoy (2011, p. 4) states “Imagine what would have happened in the financial crisis, after 2007, if we still had 27 national GAAPs. This would have significantly reduced transparency and might have made the confidence crisis that was at the root of the financial crisis even worse.

” The benefit of IFRS is grounded on the underlying principles of the proposals ingrained in the reporting system, rather than the uniformity in the application of the principles. To be realistic and practical, a system that has been enforced predominantly on the basis of consensus has a tendency to act as a focal point for the simple reason that no system in humanity is universally acceptable. The adjustment process is more decentralized with a view to ensuring continuity in the backdrop of globalization, as long as the core objective of uniformity as a basis is acceptable to the world community.

Therefore, the pertinent issue in the gamut of IFRS could be succinctly stated in the words of Iatridis (2010, p. 165): “The implementation of IFRSs would reduce information asymmetry and would subsequently smooth the communication between managers, shareholders, lenders and other interested parties (Bushman and Smith, 2001), resulting in lower agency costs (Healy and Palepu, 2001).